VIETNAM EQUITY MARKET

Investment outlook

1
Vietnam - Political Outlook
Politically stable with crackdown against corruption to retain public confidence.

 Re-appointment of Mr Trong as general secretary shows direction towards consensus-based decision-

making; party infighting has subsided and there is more unity within the party and cabinet
 Recently, the US and China have been going back and forth over tariffs on numerous products. Being the
Current State top trading partners for Vietnam, a trade war between the US and China could have an impact on
Vietnam, as Vietnam’s products are part of China’s value chain.
 How Vietnam manages its relationship with China, and its expanding bilateral relationship with the
US, will be a key contemporary challenge for Vietnam.

 Vietnam Communist Party has tried to implement next ‘Doi Moi’ which aims to drive the country’s
economic growth through greater innovation, green and technology intensive industries.
 General Secretary Trong has surprised investors with a more pursuit of reform towards development of
Initial shift in SME, supporting private firms,...
policies of new  Crackdown on Corruption: to eliminate the factionalism and close connection to vested interest group
government
 Anti-corruption drive is expected to continue but at a moderate pace
 New members to the Central Inspection Committee to ensure the Economic Growth and the Party’s
survival.

 We would expect a policy adjustments, including tighter fiscal, monetary, and credit policies than previous
year to keep the economy away from financial and real estate bubbles. This could keep domestic growth
Implications for (including consumer demand) a bit lower, but will engineer a much more sustainable growth path, retain
the Economy investor confidence, and help avoid vulnerabilities in the future.
 Gearing up to divest State-Owned Enterprises as way to improve productivity, efficiency and transparency

CONFIDENTIAL 2
Vietnam – Economic Outlook
Structural shift towards more export manufacturing, accelerating productivity. Loose fiscal & monetary policies
and weak banking system remain key risks.
Global export share (%) Vietnam ULC vs. wages, index
(% world exports) (Index, 2007 = 100)
2.5 300
ULC
TH MY ID PH VN
Nominal wages
2.0 250

1.5 200

1.0 150
Signs of accelerating
productivity
0.5 100

0.0 50
1950 1960 1970 1980 1990 2000 2010 07 08 09 10 11 12 13 14 15 16 17

Credit to GDP Gross government debt

(% of GDP) (% of GDP)
160
+ ~36% of GDP 65 Constitutional limit: 65% of GDP
140 60
+ ~22% of GDP 2017 govt debt fell to 61.3%
120
55 owing to a surge in GDP
50 rather than fall in debts
100 45
40
80 35
30
60
25
40 20
05 06 07 08 09 10 11 12 13 14 15 16 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
SBV est. of credit outstanding IMF est. of domestic credit

Note: ULC is estimated by real output per worker and nominal wages per worker.
Source: UN Comtrade, CEIC, Haver Analytics, IMF, World Bank, Strategy estimates

CONFIDENTIAL 3
Macroeconomic Environment
Strong and stable economic growth, low inflation, stable FX and interest rate but thin FX reserves and high
government deficit
Macro facts Strong and stable GDP growth, outperform other EMs

 Strong GDP growth is mainly driven by

9.6
manufacturing and processing sector (44.3% of Abnormal growth
GDP, 14% y/y). FDI is primary driver the sector’s 7.38% 2018Q1
growth, highlighting VN’s FDI-dependence 7.5
7.9
7.2 7
 Inflation in 2018 is expected to surpass the 4% 6.42
6.9 6.8 6.8
6.68 6.5
6.81
6.5
6.24 6.21
threshold, owing to rising education and healthcare 5.66
5.98
5.40 5.42
fee, commodities price, wages and expansionary 5.25
monetary policy by SBV
 Trade surplus is US$1.3b, with 24% and 16% y/y 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
growth on X and M in 2018Q1, lending hands for Vietnam Emerging and Developing Asia
growing foreign currency reserves
 Despite a rise to US$57b, FX reserves only equals Industry growth
to only 3-month export. This implies the economy’s
vulnerability to external shocks Education
Transportations and Warehousing
 Stable currency and FX rate. The highest rate by Healthcare and social welfare
Real Estate
VCB by end of 2018Q1 is 22,850VND/USD, 0.57% Finance, Banking and Insurance
above floor Accommodation and catering
Whole sale and retail
 Depository and lending rate remains stable, no Aquaculture
significant change in 2018Q1 relative to 2017 Forestry
Agriculture
 Government alarming budget deficit is caused by Construction
Utilities production and distribution
falling external rev (XM duties falls due to CPTPP
Mining
and other FTAs, poor crude oil production, low tax Manufacturing and processing
policy to attract FDI). Govt aims to raise VAT to 0% 5% 10% 15%
make up the gap
CONFIDENTIAL 4
Investment Outlook, Drivers and Industry trends
Favorable investment environment with strong and stable economic growth, low inflation low cost and abundant
labour and rising disposable income. SOEs divestment and privatization is at peak
Investment Outlook
 The economy is FDI-driven. Registered FDI in
2017 reached US$35.9b (44% y/y), highest in 10
years and FDI disbursement is US$17.5b highest
in 30 years
 Main source of exports comes from FDI.
Ratification of CPTPP, EU-VN FTA and other
FTAs expected in 2018 will boosts FDI and X
 FDI is a barometer for future growth but there is of
over-dependence. External factor may not
guarantee sustainable growth
 SOEs divestment and privatization is at peak
 In 2018, govt plans to equitise 64 SOEs and divest
181 SOEs
 In 2018Q1, US$940m raised from IPO of SOEs,
including big ones e.g.: PVOIL (US$184m), POW
(US$308m) and BSR (US$245m)
 Proceed from 2018-2020 IPOs and divestment of
SOEs is estimated to be 2.75x higher than
proceed from 2010-2017 (US$26.3b vs. US$9.5b)
 High consumer confidence boosts consumption
and spending consumer expenditure
 Renewable energy sector will attracts more
investment in 2018
Drivers Impact industry
 Low cost, abundance of labour comparable to
Southeast Asian countries  FDI mainly focus on
manufacturing sector
 Solid macro environment with strong & stable with emphasis on
GDP growth (6-7% over 10 yrs), low inflation electronics, apparel
(below 4%) and stable FX, interest rate
 Samsung and Formosa
 Govt incentives to attract FDI investment helps phone
 Low execution risk for investors thanks to and electronics sector
stable economy and steel industry
 FTAs also helps
agriculture industry
 FDI and FTAs introduces structural reforms in
the economy and fierce competition which
forces domestic companies to be more efficient
 The need of govt to cut fiscal deficit. In 2017,
govt raised US$6.4b divesting stakes in SOEs
 Proven improved efficiency and high
profitability from privatization and divestment
 Prosperous economic environment Consumer-driven sectors
 Rise in middle class and disposable income of especially F&B, healthcare
95m population. The middle and affluent class and pharmaceutical, retail,
income expects to reach 33m by 2020 services and phone
 Govt incentives: favourable electricity price of
Uscent 9.35/kWh applied for 20-year solar
power project operated before 30/6/2019
CONFIDENTIAL 5
Key challenges
In order to keep up it remarkable progress, improve business environment and retain investor’s confidence, the
main challenge is to grapple with pervasive corruption and to stabilize macro economy in the context of rising
global trade protectionism and turmoil

 Major challenges still exist, threatening the economic outlook of 2018, including non performing loans,
slowing down in the real estate market’s growth, and increased trade protection policies by developed
economies.
 The Government has drafted and implemented policies such as public-private partnership (PPP) and
Special Economic Zone model….Leading to the risk of financial and real estate bubbles, to control those
Economical
risk, the Government may adopt a more administrative interventions.
challenges
 Recently, the US and China have been going back and forth over tariffs on numerous products, such as
agricultural goods, automobile, chemicals, machinery, metals, and medical equipment... This trade
dispute between the two biggest economies in the world would have a cascading effect on Vietnam, the
short-term effect may hurt some industries, but in the longer run, Vietnam economy will benefit.

 Regulation and Corruption are the most critical challenges: the Corruption Perceptions Index (CPI) of
Vietnam increased from 33 to 35 points in 2017, and ranking 107 out of 180 countries - meaning that one
of Vietnam’s critical challenges is still there in fighting corruption.
Investing  Barriers to investment still exist, most significantly the changing and non-transparent business and
challenges investment regulations and processes.
 Restrictions on foreign investment remain an issue. Despite the Government’s efforts to lift foreign
ownership limits, there are still strict foreign ownership limitations for certain listed companies and service
sectors that are attractive to the foreign investors

CONFIDENTIAL 6
Competitive Landscape

The most dominant regional and Vietnam-based players invest primarily in private and/or unlisted companies with avg.investment
capital c.US$30m. the Fund’s unique investment approach and strategy would be a differentiator in Vietnam

Bubbles size: AUM(US$b)

100
Private Equity Funds in Vietnam

90
Navis
Investment ticket
80
size (US$m)

70

60
SCPE
50

40 TAEL
Creador
30
PENM
20 Mekong Cap VinaCap
VI group
10 Public/Private
investment
0
PrivateCompanies Public Companies

CONFIDENTIAL 7
Peers Analysis –Vietnam-based

Most PEfunds in Vietnam are offshore. Infrastructure, education, healthcare and technology are sought after sectors from PEinvestors . Each
has distinct investment strategy based on their previous experience . PEfirms prefer significant minority investments

VinaCapital Mekong Capital VI Group PENM Partners

Consumer
Consumer discretionary, Consumers, Industrials, IT,
Sector focus Consumers s
Infrastructure, IT Tourism, Financials
Industrials
Healthcare

Geographical focus SEA & China Vietnam, Laos, Cambodia Vietnam Vietnam

Start-ups, turnaround,
Investment Approach
early-stage & growth
Established scalable
Business builder High-growth, top 3 market
companies in fragmented
Strong control leaders
market

Ticket size(US$m) 10-30 (PE) 10-30 10-20 10-30

AUM (US$m) 1,800 162 400 400

Stake Minority Minority Minority Minority

Private/Public ~70% public Private Private Private

CONFIDENTIAL 8
Peers Analysis –Regional

SCPE TAEL Partners Creador CDH PE Navis Capital Lombard

Consumer,
Consumer, Consumer Consumers
Healthcare, Consumer, Industrials,
Fintech, Healthcare, , ,
Sector focus Utilities, Energy Healthcare, Financials,
Financials Financials, IT, Industrials Healthcare,
Infrastructure, Real Energy
Materials , Energy
estate
Consumer Agri
Healthcare
Geographical
Asia SEA South Asia& SEA China & Asia Australia &Asia SEA & China
focus

Mid- Leading early-

Investmen Growth Mezzanine Control
market, Growth, mid-cap stage, growth &
t Platform Play Early- Buy-
mid- & late- IPO
Approach stage out
stage
Ticket size
10-100 20-40 9-50 15-150 5-50
(US$m)

AUM (US$m) 5,000 1,000 900 10,500 400

Stake Minority Minority Minority Majority Minority

Both (mid-cap
Private/Public Private Private Private Both Private
public only)
CONFIDENTIAL 9
Sector Focus
Based on robust economic growth, Vietnam industries involving mass consumer product such as retail,
infrastructure, logistics, insurances will see a continuation of long-term trends. The 4th Industry Revolution will
bring about both huge opportunities for FinTech firm and Consumer IT with efficient business models

Consumer Infrastructure

 Retail  Power companies

 Healthcare: – Focus on renewable greenfield projects with strong
– Focus on following areas: operating partners
• Diagnostics and Imaging  Water companies
• Healthcare IT – Focus on following areas:
• Hospital and Clinic chain • Improving operational efficiency
 Education • Wide range coverage of water supply system
– Focus on independent schools and training
services

Financial Services Logistics

 FinTech companies  Warehousing/custom clearance

– From software and payments through to consumer
Internet and deep tech
– Focus on
• capital efficient business models
• annuity or transactional revenues
• 30%+ annualized revenue growth
 Non-life insurance
– Good operational track record and holding low risk
investment portfolio
– Focus on integrated logistic centers located in
strategic location and having advantage on
forwarding & custom clearance services
 Transportation/delivery/fowarding
– Focus on companies having various types of
assets including property, vehicles and
machineries with advantage on international
express.

CONFIDENTIAL 10
 Country Snapshot

Contribution to GDPGrowth by Expenditure 2011 - 2017 Inflation rate: 2016 – 2019

Stable and healthy growth with moderate inflation Vietnam's Foreign Exchange Reserves: %of GDPfrom 1995 to2017

Source: GSO, CEIC, World Bank, CIA, Philippine Statistics Authority, Bank Indonesia SDDS, Bank Negara Malaysia, Bank of Thailand, Dept. of Statistics Singapore, Bloomberg market, Financial Times Vietnam
CONFIDENTIAL 11
Country Snapshot

TradeStatistics Inflation

Vietnam’s annual FDI to various sectors CPIrates

CONFIDENTIAL 12
 FDI and domestic consumptions are key growth drivers
FDI-driven exports and rising consumption provide a solid foundation for Vietnam's economic growth in the short- and medium-term. Govt. effort in stabilizing FXrate
enhances the attractive investment environment

FDI registration and disbursement consistently accelerate […] to support export growth in short- and medium-term
(US$b) Disbursed FDI (US$b)
RegisteredFDI Export by FDIcompanies Export2
40 36.0 250
35 214

30 200 177
5.7% 162
23.0 24.0 150
25 22.0 22.0 A17%
20.3 150 132
20 145 114
15.0 16.0 97
15 8.4% 100
10 152
111 124
50 94
5 64 81 80
11.0 10.0 12.0 13.0 15.0 16.0 18.0 8.4 48
0
0
2011 2012 2013 2014 2015 2016 2017 1H18 2011 2012 2013 2014 2015 2016 2017 1H18
• Top 4 FDI countries: Korea, Japan, Singapore and Thailand • FDI enterprises contribute on avg. 64% total export value
Numbers in bubble indicate YoY growth
Steady private consumptiongrowth Govt. lifted foreign reserves in 1H18 to stabilize FX
(US$b) % (US$b) %
200 Retail Sales Value Retail Sale Value Growth 30 80 Reserves VND devaluation vs. USD(year-end) 10
7.9
24.2

150 60 5.0
20 5
16.0
1.2
100 12.6 40 1.4
10.6 10.2 10.9 -1.0 1.1
9.5 -0.2
10.7
10 0
50 20

88 102 115 129 142 155 173 93 14 26 26 34 29 41 52 64

0 0 0 -5
2011 2012 2013 2014 2015 2016 2017 1H18 2011 2012 2013 2014 2015 2016 2017 1H18
Source: GSO, investing.com, Fiinpro Stoxplus, ndh.vn, SBV

CONFIDENTIAL 13
Country Snapshot
Investment Thesis: Robust FDI, cyclical recovery in domestic demand, structural reforms with CPTPP accessions
Risk: Fiscal sustainability, weak banking system, limited policy buffer
Vietnam Snapshot (2017) Smallest economy with highest growth rate in ASEAN-6

Nominal GDP (US$b) 222.8 Nominal GDP Real GDP growth

Real GDP growth (%, y/y) 6.81 1,200 8
6.8 6.7

GDP components
Private Consumption as % of GDP** 65.5 1,000 5.9 7
5.1 6
Government consumption as % of GDP 17.2 800 5
3.9 3.6
Investment as % GDP 33.3 600 4
400 3
Export as %GDP (Key products: phones, 96.1 2
computers, electronics, garment, 200 1
footwear, crude oil, seafood, rice coffee) 223 315 1,043 291 424 303
0 0
Import as % GDP 94.8 Vietnam Philippines Indonesia Malaysia Thailand Singapore

CPI (%, y/y) 3.53

Budget balance (% of GDP) -2.3 Healthy GDP growth with manageable inflation
Macro

Public sector debt (% of GDP) 61.3

Real GDP growth CPI
Current account surplus (% of GDP) 1.2
8 30
FDI disbursement (US$b) 17.5 6.7 6.8
7 6.4 6.2 6.2
6.0 25
Remittance (US$b) 13.8 6 18.7 5.3 5.4
5 20
Population size (m) 93.7
4 15
8.9 9.1
Population

GDP per capita (US$m) 2385 3

6.6 10
2 4.1 3.2 3.5
Labour force (m) 53.7 5
1 0.9
Median age 30.5 0 0
2010 2011 2012 2013 2014 2015 2016 2017
Unemployment (%) 2.24
Source: GSO, CEIC, World Bank, CIA

CONFIDENTIAL 14
Exports and Private Consumption are Key Growth Drivers
FDI-driven exports and rising consumer confidence provide solid foundation for Vienam’s economic growth in the
near to medium term
Strong FDI commitment and pick-up in disbursement …to drive export growth in the medium term

Registered FDI Disbursed FDI

44.4% US$b Export
US$b 21.1%
250
40 35.9
35 200
30 24.4
25 22.3 21.9 22.8 150
10.7%
20 14.7 16.3
100
15
10 50
5 11 10.46 11.5 12.5 14.5 15.8 17.5 97 115 132 150 162 176 214
0 0
2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016 2017
• Top 5 FDI countries: Korea, Japan, Singapore and Thailand • FDI enterprises contribute 72.6% total export value
Numbers in bubble indicate YoY growth

Steady private consumption recovery in real terms Improving reserves provide cushion for FX rate
Retail sales VALUE growth Retail sales VOLUME growth Reserves
US$b VND devaluation vs. USD (year-end)
%
30%
24.2% 50 10
25% 7.9 41
40 8
34
20% 16.0% 29 6
12.6% 30 26 26
15% 10.6% 10.2% 10.9% 4
9.5% 5.1
10% 20 14
1.3 2
1.2 1.4 -0.3
5% 10.0% 10 -0.9
8.4% 7.8% 0
6.2% 5.6% 6.3%
0% 4.7% 0 -2
2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016 2017

Source: GSO, investing.com

CONFIDENTIAL 15
Identified Macro Trend (10 years+) Driving the Economy
Domestic Consumption growth and an increasingly open economy provide engine for growth
Themes Commentary Impact

 45.6% population in 25-54 age group

Consumption  Young age and old age dependency is 23.6% and 6%  Beneficiary sectors: Retail,
Growth  Middle and Affluent Consumer (MAC) population grow to 33m by 2020 TMT, Life Sciences, FIG,
 Consumer balance sheet is heathy with net cash (retail deposit US$b vs. Real Estate, Logistics
~US$b consumer loan)

 US withdrew from TPP as a result of Trump “American First” programme.  Increase FDI, job creation
CPTPP and
Yet, following the APEC Summit 2017, CPTPP was created with 11 country  Improve BOP, but
FTAs
participants to replace TPP increase competition for
 2/3 of the chapters is identical to TPP, thus CPTPP has smaller domestic producers,
scope is still meaningful manufacturers and
 Vietnam expects to benefit from a 1.1% increase in GDP given retailers
status quo productivity or 3.5% with increased productivity and a  Increase real wages of
4.2% and 6.9% increase in Exports in 2 scenarios respectively by unskilled workers (e.g.:
2030 (WB) textiles)
 Realised quicker than TPP, 2 months after 6/11 members ratifies  Anchor and accelerate
the agreement, it comes into force domestic structural
 CPTPP expects to bring in external structural reforms (IP rights, reforms
investor protection, SOE mngt, labour and environmental  Beneficiary sectors:
standards, etc). This helps with productivity improvement electronics, apparel,
 Ratification of EU-Vietnam FTA is delayed by a 2017 opinion of the seafood and other
European Court of Justice agricultural products

 Improve foreign reserve

Increasing FDI  Increasing exports of value-added products  Move to higher value
and  US$71b electronics and phones export in 2017 (+33%y/y) vs. chain
Manufacturing US41$b in garment and footwear export (+11.3% y/y)  Increase worker’s wage
Competitiveness  Competitive labour cost – basic worker wage around US$250/month, and purchasing power
minimum wage is between US$116 and US$166/month, remains the  Beneficiary sector:
lowest in Southeast Asia electronics, apparel,
footwear
Source: GSO, CIA Factbook

CONFIDENTIAL 16
Equity Market still Developing
VNINDEX consists of ~400 companies and accounts for ~76% of GDP; the index has been hovering between 1200
for the past 2.5 years. Valuation is undemanding at 18,7x forward PE, higher than average in ASEAN-5 region
TSR
Data as of 11 May 2018 30 (%)
VNINDEX: 1044.85 3M ADTV: 30 US$ daily 20
YTD return: 6.16% Trailing PE: 18,7x
10
Market cap: 183US$b Forward PE: 20,0 (vs. average of 16.3x in ASEAN-5) 10.8 23.7 16.0
0
1yr 3yr 5yr
Oil price surge

 APEC 2017 reinsured

and renamed TPP to
Market crashed due
CPTPP
to rich valuation
East Sea  Bitcoin reached
tension $20,000/BTC
with China

 NPL issues Oil price

 High inflation crash
Political uncertainties
GFC Fed
rate
hike

RMB
devaluation
 VN joined WTO
 26 listed companies
 Stimulus package
 Mkt cap: 0.5% of GDP
 Expansionary policies

Source: Vndirect

CONFIDENTIAL 17
Thank you.

18